With $3.2-billion in the piggy bank, miner is on lookout for acquisitions

VANCOUVER -- Loaded with cash and betting on strong metal prices, Teck Cominco Ltd. more than doubled its shareholder dividend yesterday, but chief executive officer Don Lindsay said the company still has plenty of financial room to manoeuvre.

"Our shareholders have made it very, very clear that they want us to grow the company and that's what we intend to do," Mr. Lindsay said following Teck's annual meeting in Vancouver.

"This preserves several billion dollars of financial capacity. We basically think we have about as much capacity as we would need to do anything we could possibly consider."

Teck moved into the oil sands last year with the purchase of a 15-per-cent interest in the Fort Hills Energy Limited Partnership, which is developing the Fort Hills project in northern Alberta.

With $3.2-billion in cash against $1.5-billion of long-term debt at the end of the first quarter, Teck is considered to be a likely buyer in an sector bubbling with merger and acquisition activity.

The company is looking for potential acquisitions, Mr. Lindsay said, but is in no rush.

"We are still looking. We think there are opportunities out there, but commodity prices have risen so quickly that it makes you cautious," Mr. Lindsay said after the meeting. "It makes you step back and say, has there been a real sea change [in the commodities market] or is there going to be a correction.

"Because if there is a correction, obviously that's a much better time to make any moves you might make."

The company increased its semi-annual dividend on its class A common and class B subordinate voting shares from 40 cents a share to $1 a share, effective with the dividend payable on July 4, 2006.

The increase was the latest in a series of hikes to the company's dividend since 2004 and brings its dividend yield to 2.5 per cent, Mr. Lindsay said during the meeting, "which is significantly higher than our direct competitors, above the insurance companies and slightly below the banks."

Teck, which produces zinc, copper, gold and coal, has been posting a string of record-breaking quarters as prices for all of its products have been surging over the last couple of years.

Mr. Lindsay, presiding over his first shareholders' meeting as CEO since he assumed the post in early 2005, said Teck remains committed to its strategy of diversification, which he said protects the company from price swings in any one of the commodities it produces.

"It's true that they [metals] can all go down at once, but they can all go up at once too, as we're seeing now," he said.

Metal prices surged during the first quarter, a trend that could add millions to Teck's bottom line if it continues, he said.

For example, each 1-cent increase in the price of zinc adds an estimated $10-million after-tax profit to the company's bottom line.

Zinc prices have climbed by about 50 cents in April.

"There could be a correction at any time, but for now we are happy to produce as much as we can and take these prices," he added.

On the growth front, Teck finished building its new Pogo gold mine in Alaska during the first quarter.

Full commercial production at the mine was expected this year but start-up problems caused delays and full production is now expected some time in 2007.

With joint venture partner Falconbridge Ltd., Teck plans to reopen Lennard Shelf, a zinc project in Australia that has been on care and maintenance since 2001.

Teck has also opened an office in Beijing, part of a push to increase its activity in China.

Teck class B shares closed up 25 cents to $80.20.

Teck Cominco

Q1 2006 2005
Profit $448-million $205-million
EPS $2.19 $1.01
Revenue $1.3-billion $928-million

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WENDY STUECK
MINING REPORTER

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